The good news is marketing budgets have been on a steady incline for the past few years and have officially climbed all the way to 12 percent of company revenue. In fact, 2017 is the third consecutive year of marketing budget increases across the US and the UK—so it seems like everyone is spending more. The bad news is you still have to validate your marketing budget to your boss, which isn’t the easiest thing to do.
If it’s time for you to take the plunge and justify your marketing budget to your boss, have no fear. While it might feel like an intimidating situation, there are things you can do to better support your spending and position your plan as the right route to take. To get your boss on your side, here’s how you can justify your marketing budget.
Know What Everyone Else Is Spending
First things first, know what everyone else is spending—and by everyone else, we mean your direct competitors. You don’t need to know exact numbers and figures, but you should have a ballpark idea of how much your competitors have been spending and plan to spend in terms of marketing.
If a similar-sized business has invested 14 percent of its annual revenue to its marketing budget, but your boss only wants to invest eight percent, you’re running into an issue. If your competitor is able to support a bigger spend, it’s likely it’ll be able to reach potential customers before you, putting your business on the backburner. This won’t improve your bottom line. In order to reap the rewards of great marketing, you first have to make the investment.
Invest in the Trends
Times change. Perhaps one day a smaller marketing budget was able to get you by with a few newspaper ads, but today there are dozens of new trends that require just as much, if not more, attention. From content marketing and website creation to video production and influencer marketing, there are more places to invest and more ways to reach customers.
For instance, it’s predicted that, by 2018, ad spend on native advertising will reach $21 billion—and that’s just one of the latest marketing trends. Content marketing is at an all-time high, YouTube users have increased by 40 percent, chatbots answer questions better than people, and SEO is considered a must. It’s an overwhelming time to be a marketer.
In terms of justifying your marketing budget, it’s important to define each new trend you plan on funding and exactly how it will benefit the business. Showcase the latest trends, define how they will help you reach your target audience, and explain how that will then translate to more sales.
Without this breakdown, you run the risk of leaving your boss confused as to why and how this is going to work.
Ditch What Didn’t Work and Invest in What Did
Before you start creating a new marketing budget, take a peek at the last one. Were there any strategies that worked really well? Were there any that didn’t perform the way you expected? Where could you have allocated money more wisely?
These are things you need to know as they help you define where more of the budget should be spent and where you can cut costs. Perhaps your company used part of the budget last quarter to redo the website and start a blog. Did the blog help bring in any new customers? If it did, you should probably think about putting more of your budget into continued high-quality content. If it didn’t, maybe you should explore a different tactic, such as video content or influencer marketing.
No matter how well or poorly something worked, your boss will be pleased that you took the time to consider the last budget before creating a new one.
Prove The ROI Using KPIs
It’s easy to say something worked really well, but without the numbers to prove it, you’re going to have a hard time selling it. One of the easiest ways to do so is by collecting and analyzing data from your key performance indicators (KPIs).
Before you spend any money, you’ll need to define your KPIs. Hopefully, this is something you’ve already been doing, as the data from your KPIs will help justify your current budget. KPIs should align with business goals, but they do tend to differ from one business to the next. However, they should always show clear signs of gains, whether that be from sales, conversions, or customer value. There are some standard KPIs that help you showcase the marketing return on investment (ROI):
The purpose of marketing is to increase sales, so you have to be able to demonstrate that your efforts have done just that. If you’re able to show how your marketing has and will continue to increase sales revenue, it will make a more valid argument for increasing your budget. Your boss will be more than willing to accept your budget once he knows the ROI.
Customer Retention Rate:
This is a measure that shows the percentage of customers who continue to purchase your product or service over an extended period of time. The customer retention rate can measure the effectiveness of customer service, ease of buying, and other aspects of your brand or product that make people buy again and again.
Customer Acquisition Costs (CAC):
CACs are the cost of convincing a potential customer to buy your product or service. The lower the number, the better, as it’s an indicator that your marketing is working and making people want to buy. If the number is high, it usually indicates there’s inefficiency in your marketing—it’s costing a lot to convert a lead into a sale.
Customer Lifetime Value (LTV):
Think of LVT as the worth of a customer over the entire relationship with your company. While one customer might be worth very little, others could be worth a lot. It’s not until you uncover your most profitable customers that you can begin taking the steps to align your resources.
Remember, marketing helps create a better future for the business. So if you’re able to prove the ROI using clear data from KPIs, your boss is going to be more inclined to listen and more likely to approve your budget.
Make Things Adjustable
If you try to convince your boss this is the only budget that’s going to work, it’s going to be a hard sell. People like to feel as though things are open for discussion, are able to evolve, and have the ability to be altered if things aren’t working out.
For this reason, leaving the budget somewhat open-ended can often work in your favour. Not only does this create an open invitation for dialogue, but you might be able to leave the meeting with more money to play with. Be open to suggestions, invite questions and concerns, and be flexible—you’ll have a much better chance of getting your budget approved if you hear everyone clearly than if you’re closed off to ideas.